Westport Insurance Corporation v. City Of Waukegan et al

Filing
167

MEMORANDUM Opinion and Order. The Court grants Westport's motion for summary judgment 131 and denies Waukegan's motion for summary judgment 132 . Westport does not owe reimbursement to Waukegan for any portion of its defense costs incurr ed in Rivera's underlying lawsuit, and Westport does not have a duty to indemnify Waukegan for its settlement of Rivera's underlying lawsuit. Westport's motion for leave to supplement the summary judgment record 160 is granted. This Court's December 11, 2014 Order (ECF Nos. 83 and 84 ) is vacated to the extent that it declared that Westport had a duty to defend the Waukegan defendants. Civil case terminated. Signed by the Honorable Jorge L. Alonso on 9/13/2017. Notice mailed by judge's staff (ntf, )

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
WESTPORT INSURANCE
CORPORATION,
Plaintiff,
v.
CITY OF WAUKEGAN,
LUCIAN TESSMAN, DONALD MEADIE,
FERNANDO SHIPLEY, HOWARD
PRATT, RICHARD DAVIS, PHLLIP
STEVENSON, TERRY HOUSE, ROBERT
REPP, BURTON SETTERLUND, ESTATE
OF DENNIS COBB, and JUAN A. RIVERA,
JR.,
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Case No. 14-cv-419
Judge Jorge L. Alonso
Defendants.
MEMORANDUM OPINION AND ORDER
Plaintiff Westport Insurance Corporation (“Westport”) brought this action against
Defendants, the City of Waukegan, Lucian Tessman, Donald Meadie, Fernando Shipley, Howard
Pratt, Richard Davis, Phillip Stevenson, Terry House, Robert Repp, Burton Setterlund
(collectively, the “Waukegan Defendants” or “Waukegan”), and Juan A. Rivera, Jr. (“Rivera”),
seeking a declaratory judgment that it has no obligation to provide coverage under two insurance
policies issued to the City of Waukegan. The case is before the Court on cross-motions for
summary judgment. For the following reasons, the Court grants Westport’s motion and denies
Waukegan’s.
DISCUSSION
The Court has already described the factual background in its earlier opinion in this case.
(See ECF No. 123 (“reconsideration ruling”) reported at Westport Ins. Corp. v. City of
Waukegan, 157 F. Supp. 3d 769 (N.D. Ill. 2016); see also ECF Nos. 83 and 84 (“trigger ruling”)
reported at Westport Ins. Corp. v. City of Waukegan, 75 F. Supp. 3d 821 (N.D. Ill. 2014).) Judge
Darrah, the judge to whom this case was previously assigned, ruled in 2014 that Rivera’s lawsuit
against Waukegan—in particular, his claim that Waukegan violated his Fifth Amendment selfincrimination rights pursuant to 42 U.S.C. § 1983 by using a coerced confession against him at
his second trial in 1998—triggered Westport’s duty to defend stemming from the 1998 policy
Westport issued to Waukegan.
After this case was reassigned to the undersigned judge, Westport moved to reconsider
Judge Darrah’s trigger ruling in light of a subsequent case of the Illinois Appellate Court, Indian
Harbor Insurance Co. v. City of Waukegan, 33 N.E.3d 613 (Ill. App. Ct. 2015).
On
reconsideration, this Court reaffirmed Judge Darrah’s trigger ruling, concluding that recent
Illinois cases such as Indian Harbor addressing trigger of coverage in the context of malicious
prosecution claims or prosecutorial due process claims under Brady v. Maryland, 373 U.S. 83
(1963), do not necessarily control this case. The Court reasoned that the “essence” of a § 1983
claim for violation of Fifth Amendment self-incrimination rights, or the conduct that essentially
causes the “injury,” in the language of the policy, is courtroom use of the coerced confession,
which occurs at a different time from the essential tortious acts underlying malicious prosecution
or Brady claims, and therefore triggers insurance coverage at a different time. See Westport, 157
F. Supp. 3d at 775-76 (citing Muller Fuel Oil Co. v. Ins. Co. of N. Am., 232 A.2d 168 (N.J.
Super. Ct. App. Div. 1967)); see also Indian Harbor, 33 N.E.3d at 622 (“Indeed, the policies do
not require that all of Rivera’s claims arise from a single occurrence and must have the same
trigger date as his malicious-prosecution claim.”).
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The parties have now filed cross-motions for summary judgment. Waukegan seeks (a) a
declaration that Westport owes Waukegan a duty to pay defense costs arising out of, and
indemnify for amounts paid to settle, Rivera’s lawsuit against Waukegan, as well as (b) a
declaration that Westport has breached its duty to defend. Westport seeks a declaration that (a)
even though this Court has ruled that Westport had a duty to defend Waukegan, Westport owes
no defense costs because Waukegan’s defense costs do not exceed the self-insured retentions
prescribed by the policy, and (b) Westport owes no indemnity because the 1998 retrial was not
the primary focus of Rivera’s lawsuit.
After full briefing on the motions, Westport alerted this Court to a new Illinois Appellate
Court decision that Westport argues is controlling. St. Paul Fire & Marine Insurance Co. v. City
of Waukegan, 2017 IL App (2d) 160381, ¶¶ 44-48, is another case, like this one and Indian
Harbor, concerning the proper trigger of coverage for Rivera’s lawsuit against Waukegan. In St.
Paul, the Illinois Appellate Court considered whether Rivera’s Fifth Amendment selfincrimination claim triggered Waukegan’s insurance coverage in 2009, during his third trial.
The court cited Judge Darrah’s trigger ruling and this Court’s reconsideration ruling, but it
disagreed with them because it did not recognize any distinction between a Fifth Amendment
self-incrimination claim and a malicious prosecution or Brady claim for purposes of triggering
insurance coverage; for all such claims, according to the Illinois Appellate Court, it was “the
misconduct that led to [Rivera’s] conviction” in 1992 that triggered insurance coverage. Id. at ¶
47. In its most recent filing, Westport argues that based on this new authority, this Court must
abandon Judge Darrah’s reasoning and the reasoning this Court employed in its reconsideration
ruling, and instead apply the Illinois Appellate Court’s decision in St. Paul, which would require
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this Court to hold that Westport owes no duty to defend or indemnify Waukegan for Rivera’s
lawsuit.
The Court agrees with Westport. Illinois law governs this insurance coverage dispute.
This Court is bound to follow a decision of the Illinois Appellate Court on an issue of Illinois law
in the absence of any strong, direct indication that the Illinois Supreme Court would not. As the
United States Supreme Court has explained:
Where an intermediate appellate state court rests its considered judgment upon the
rule of law which it announces, that is a datum for ascertaining state law which is
not to be disregarded by a federal court unless it is convinced by other persuasive
data that the highest court of the state would decide otherwise.
West v. Am. Tel. & Tel. Co., 311 U.S. 223, 237 (1940); cf. Robinson v. Ada S. McKinley Cmty.
Servs., Inc., 19 F.3d 359, 363 (7th Cir. 1994) (quoting the same language but declining to follow
an Illinois Appellate Court decision that it deemed “so contrary to basic contract principles and
notions of fairness” that the Illinois Supreme Court would not follow it). In this case, there is no
“persuasive data” in other decisions of Illinois courts that might induce this Court to conclude
that the Illinois Supreme Court would not follow St. Paul. Cf. Acuity v. Lenny Szarek, Inc., 128
F. Supp. 3d 1053, 1061 (N.D. Ill. 2015). As far as this Court is aware, St. Paul is the only
Illinois decision to directly address trigger of coverage for a Fifth Amendment self-incrimination
clause civil rights claim. It did so in a case that involved coverage for the exact same claim of
the exact same underlying action that also underlies this case, under circumstances that were
essentially indistinguishable.
This Court will adhere to the Illinois Appellate Court’s
pronouncement in St. Paul.
This is so despite Waukegan’s attempt to distinguish this case from St. Paul based on
differences in the policy language; in particular, the St. Paul policy covers claims for injury
caused by “a wrongful act,” whereas the Westport policy covers claims for injury arising out of
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an “offense.” Based on this difference, Waukegan argues, the Westport policy is not triggered
until the underlying claim accrues, in the sense that all the elements of an “offense” for which the
plaintiff can recover have occurred. Based in part on similar reasoning, Waukegan explains, the
Seventh Circuit ruled in American Safety Casualty Insurance Co. v. City of Waukegan, 678 F.3d
475 (7th Cir. 2012), that insurance coverage for a malicious prosecution claim was triggered at
the time of exoneration. But in that case, the Seventh Circuit also explicitly stated that it was
guided by what was then the only Illinois decision on point, Security Mutual Casualty Co. v.
Harbor Insurance Co., 382 N.E.2d 1, 6 (Ill. App. Ct. 1978). The Illinois Appellate Court has
now roundly rejected Security Mutual. See St. Paul, 2017 IL App (2d) 160381, ¶¶ 31-32 (citing
cases). In particular, Waukegan’s proposed rationale is foreclosed by County of McLean v.
States Self-Insurers Risk Retention Group, Inc., 33 N.E.3d 1012 (Ill. App. Ct. 2015), in which the
policy used the term “offense” rather than “wrongful act,” but the Illinois Appellate Court
nevertheless followed the Indian Harbor decision in holding that coverage for a malicious
prosecution claim is triggered at the time the malicious prosecution was initiated, not at the time
the tort accrues.
The Illinois Appellate Court has held that the misconduct that led to Rivera’s conviction
in 1992 is the essential cause of the injury arising out of the violation of his Fifth Amendment
self-incrimination rights. Just as the Seventh Circuit in American Safety recognized the wisdom
of following “the only Illinois appellate decision on the issue,” 678 F.3d at 479-80, see also id. at
481, this Court recognizes that it must follow St. Paul, the only Illinois appellate decision on the
issue of trigger of coverage for a Fifth Amendment self-incrimination claim.
For these reasons, this Court grants Westport’s motion for summary judgment and denies
Waukegan’s motion for summary judgment.
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Westport does not owe reimbursement to
Waukegan for any portion of its defense costs incurred in Rivera’s underlying lawsuit, and
Westport does not have a duty to indemnify Waukegan for its settlement of Rivera’s underlying
lawsuit. In order to avoid any confusion that may arise from the inconsistency of today’s ruling
and Judge Darrah’s trigger ruling, and in light of the fact that Waukegan has had an opportunity
to address the impact of the Illinois Appellate Court’s decision in St. Paul (see Waukegan’s
Resp. to Westport’s Notice of Supp. Authority, ECF No. 166), the Court vacates Judge Darrah’s
order to the extent that it declared that Westport had a duty to defend Waukegan in Rivera’s
lawsuit. 1
CONCLUSION
For the reasons set forth above, the Court grants Westport’s motion for summary
judgment [131] and denies Waukegan’s motion for summary judgment [132]. Westport does not
owe reimbursement to Waukegan for any portion of its defense costs incurred in Rivera’s
underlying lawsuit, and Westport does not have a duty to indemnify Waukegan for its settlement
of Rivera’s underlying lawsuit.
Westport’s motion for leave to supplement the summary
judgment record [160] is granted. This Court’s December 11, 2014 Order (ECF Nos. 83 and 84)
is vacated to the extent that it declared that Westport had a duty to defend the Waukegan
defendants. Civil case terminated.
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The parties have treated Judge Darrah’s trigger ruling as if it is not a final, appealable order because it did not fully
dispose of the issues between the parties and therefore “may be revised at any time” before final judgment under
Federal Rule of Civil Procedure 54(b). To whatever extent, if at all, Judge Darrah’s trigger ruling might be
considered a final judgment on the duty to defend issue, the Court vacates it pursuant to Rule 60(b). See Judson
Atkinson Candies, Inc. v. Latini-Hohberger Dhimantec, 529 F.3d 371, 385 (7th Cir. 2008) (“[A] majority of circuits
to have considered the power of a district court to vacate a judgment under Rule 60(b) have concluded that district
courts have the discretion to grant such relief sua sponte.”) (citing, inter alia, Fort Knox Music Inc. v. Baptiste, 257
F.3d 108, 111 (2d Cir. 2001) (“While normally such relief is sought by motion of a party, . . . nothing forbids the
court to grant such relief sua sponte.”)); see also Mendez v. Republic Bank, 725 F.3d 651, 660 (7th Cir. 2013)
(affirming district court’s decision to reverse itself under Rule 60(b) because “where a district judge recognizes a
clear legal or factual error . . . , no purpose is served by prohibiting the district judge from remedying the error”).
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SO ORDERED.
ENTERED: September 13, 2017
______________________
HON. JORGE ALONSO
United States District Judge
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